Shipping and trucking industries gearing up for new 2020 ocean vessel fuel mandate

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Six months before ocean vessels will be required to burn low-sulfur fuel, such as diesel used in trucks, a U.S. Department of Commerce advisory committee disclosed recommendations to mitigate potential fuel shortages and price spikes.

The International Maritime Organization will mandate that the cargo shipping and cruise line industries shift from marine diesel (so-called bunker fuel) to ultra-low-sulfur diesel starting Jan. 1.

Most ships are expected to use new blends of fuel oil, which will be produced to meet the 0.5 percent limit from 3.5 percent on sulfur oxide (SOx).

Heavy fuel has been used by the maritime industry for years despite criticism of pollutants, partly because of its lower cost.

Limiting SOx emissions from ships will improve air quality and protect the environment.

The main type of bunker oil is derived as a residue from crude oil distillation. Crude oil contains sulfur which, after combustion in the engine, ends up in ship emissions. In the atmosphere, SOx can lead to acid rain, which can harm crops, forests and aquatic species, and contribute to the acidification of the oceans, according to IMO.

The Advisory Committee on Supply Chain Competitiveness said the cost and operational impact of the rule remains uncertain while cargo owners, carriers and fuel users need as much transparency as possible regarding fuel availability and price increases. Further, it suggests that the affected industries and the public be kept aware of the low-sulfur regulation and that the U.S. Energy Information Administration immediately create a web page with regular updates on prices and availability.

Port and trucking officials told Transport Topics they are cautiously optimistic about getting through the transition.

“My concern is if there is a huge jump in demand for low-sulfur diesel for shipping vessels we have an adequate supply,” said Armand Patella, a vice chairman of the Maryland Motor Truck Association.

Patella said the petroleum industry, along with the shipping and trucking industries, have been working to develop a strategy.

An alternative to using low-sulfur diesel, approved by IMO, involves installing scrubber technology on ships to remove pollutants and get SOx emissions to required levels.

“There are at least four suppliers of low-sulfur fuel out there, so it seems like most have a plan around phasing ships into scrubbers and using this type of fuel,” said Bayard Hogans, vice president of Ports America Chesapeake, which operates Seagirt Marine Terminal at the Port of Baltimore via a public-private partnership with the Maryland Port Administration.

The panel also advised the Commerce and Energy departments:

Make available information about IMO-compliant fuels, including low-sulfur diesel, truck and rail diesel, liquefied natural gas and other alternatives.

Increase federal support for alternative fuel research, including engine and fuel production technology.
Determine whether the nation has sufficient low-sulfur crude reserves and refined products to avoid potential supply disruptions for the nation’s transportation system and heating supply.

Determine whether the nation’s heavy crude oil and fuel transportation network has sufficient flexibility and capacity.
In a letter to President Donald Trump, 10 Republican senators, some from energy-producing states, expressed support for the mandate. They said the nation’s growing energy dominance puts the country at “a distinct advantage” to global competitors.

“Any attempt by the United States to reverse course on IMO 2020 could create market uncertainty, cause harm to the U.S. energy industry and backfire on consumers,” according to the letter dated April 29.

Strike halts grain exports in Argentina

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BUENOS AIRES, ARGENTINA — A nationwide strike in Argentina protesting austerity measures under President Mauricio Macri brought the country’s airports to a standstill and halted work at key grains ports on May 29, according to a Reuters report.

The strike, called by the country’s main unions, comes as center-right leader Macri tumbles in the polls ahead of presidential elections in October, his popularity with voters hurt by high inflation, job losses and a weak peso.

According to Reuters, Argentina’s airports were shut down as a result of the strike, while grain exports stopped at the ports in Rosario, one of the most important agro-industrial regions in the world.

In February 2018, trucker owners went on strike briefly to attempt to force the adoption of minimum grain hauling rates, halting exports at the Port of Rosario.

That strike also affected the operation of grain mills in the Santa Fe province, where 80% of the country’s agricultural exports are processed, transported and loaded onto ships.

With 6.8 million tonnes of soybean exports in 2018-19, Argentina ranks third in that category behind Brazil and the United States, according to the U.S. Department of Agriculture.

Ag container shippers figure prominently in latest Top 100 U.S. exporter rankings; focus shifting to SE Asia development

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By Bruce Abbe

Familiar names of U.S. container ag export shippers popped up once again in the latest annual Top 100 U.S. Importer and Exporter rankings published in last week’s print issue of the leading transportation industry publication, the Journal of Commerce (JOC). SSGA provided insights to a second accompanying JOC feature story in that key annual issue on how U.S. ag exporters are accelerating their focus on developing Southeast Asian markets.

The rankings were based on data from Port Import/Export Reporting Service (PIERS), a sister company of JOC, which are based on bill of lading reports provided to U.S. customs regulators.

Note: One key factor worth noting, however, is that PIERS data only comes from reports provided to the U.S. government on shipments leaving from U.S. ports. Numbers from ag and other U.S. exporters that use Canadian railroads to ship from Canadian ports are not included in the JOC Top 100 statistics, so the actual container exports from the U.S. shippers are often larger.

The JOC/PIERS data is reported in twenty-foot equivalent units (TEUs), the standard method for measuring container volumes. Since 40 foot containers are the larger, more commonly shipped size of containers on ocean vessels, compared to 20 foot containers, the number of actual ocean-going containers is less than the TEU totals.

Among the Top 100 U.S. container ag grain and oilseed exporters in 2018 by ranking were:

  1. The DeLong Company, number four overall, with 144,461 TEU’s in 2018 shipped from U.S. ports. Animal feed/food grain & soy.
  2. Louis Dreyfus Company, 85,166. Predominantly cotton.
  3. Lansing Trade Group, 65,181. Animal feed & grain.
  4. Cargill, 61,869. Conglomerate (variety of export products).
  5. Scoular, 57,570. Agricultural goods.
  6. Gavilon, 55,344. Animal feed and grain.
  7. Archer Daniels Midland, 43,132. Agricultural goods.
  8. CHS, 41,408. Agriculture, energy, food products.
  9. Al Dahra ACX Global, 38,171. Animal feed & grain.
  10. Perdue Agribusiness, 32,170. Food and feed products.
  11. Green Plains Trading, 31,911. Animal feed and grain, primarily DDGS.
  12. Fornazor International, 25,044. Animal feed and grain.
  13. Prairie Creek Grain, 24,339. Animal feed and grain.
  14. Toyota Tsusho America, 16,671. Conglomerate (variety of export products including grain & feed).
  15. Poet Nutrition, 12,942. Animal feed and grain, primarily DDGS.
  16. Stone Arch Commodities, 12,200. Animal feed and grain.

It’s worth noting that all but two of the above-mentioned ag shippers are recent members of the Specialty Soya and Grains Alliance (SSGA), or have been sponsors or exhibitors at SSGA’s annual international soy and specialty grains conference.

Other prominent U.S. ag companies on the list include meat exporters JBS USA, Tyson Foods and Smithfield foods; chemical and other products exporter Dupont; and John Deere equipment manufacturer.

The top three exporters were conglomerate Koch Industries, International Paper, and American Chung Nam, a leading paper and plastics recycling company.

The leading U.S. importers, in order, included Walmart, 940,410 TEU; Target, 631,621; and Home Depot, 417,000.

Go here to view JOC’s Top 100 Importers and Exporters coverage in detail.

Growing SE Asia Market

The total number of U.S. ag exports in 2018 of container shipped grains, cotton, fruits, nuts, vegetables, oilseeds such as soybeans, and related food & feed products totaled 1,465,462 TEUs, JOC reported. That was relatively flat, down just 0.1 percent from 2017.

However, that doesn’t reflect the shift in export markets and destinations that has been going on in a big way over 2018.

SSGA factored in a separate analysis feature story reported by JOC.

“Agricultural products are susceptible to global events beyond the control of growers, including weather, currency fluctuations, tariffs, and environmental and quality restrictions,” said Bruce Abbe, past president of the Midwest Shippers Association (MSA) and strategic adviser for SSGA. “The slight dip in exports in 2018 reflected tariff issues in China and India.”

Among North Asia Markets, U.S. ag exports to China in 2018 dropped 24.5 percent from 2017; and slid 6.5 percent to Japan, and 10.4 percent to South Korea. However, exports to Taiwan bumped up by 16.4 percent.

The Southeast Asian market, however, “has been fertile ground for U.S. ag exports over the past five years,” JOC reported. U.S. container ag exports were up – 9.9 percent to Indonesia, 38.1 percent to Vietnam, 21 percent up to Thailand, and up 44.2 percent to the Philippines in 2018 compared to 2014.

Container ag exports from the U.S. continue to be largely based on being the “backhaul” in the Trans Pacific lanes for getting containers back to manufacturers in Asia for the more lucrative “head haul.” While the West Coast ports remain the leading outbound gateways, JOC noted that East and Gulf coast ports “are more diversified, exporting sizable volumes to Latin America and Europe, as well.”

Abbe added that the exporters of specialty products, such as peas, lentils and pulses say markets throughout Southeast Asia and the Indian subcontinent will continue to grow in the coming years as manufacturing jobs expand and the middle-class populations in those regions increase. Carriers welcome this development because it generates a two-way haul, with imports of consumer merchandise into the U.S. and growing agricultural exports for the backhaul.

Go here for the full, more detailed story.